Covid and war, abusive policies and rising costs have made business reconsider China.
It is not clear Beijing is aware of what is happening. Its abusive policies and rising costs in China have prompted Japan and the west to begin to rethink their economic arrangements in the Middle Kingdom. To turn things back the way they were, Beijing would have to change much, more than is likely or perhaps even possible. American and European as well as Japanese sources have all taken on an anti-Chinese tone. Congress in the States is set to pass legislation that would limit investing in China and especially sourcing there. This legislation is probably behind the curve. Long before Congress moved, business almost universally began to express concerns about future Chinese relationships. Joerg Wuttke, president of the EU Chamber of Commerce in China summed up matters, recently saying that “China is losing credibility as a best-source location.” All foreign business seems eager to change former supply-chain arrangements. Few are ready to pull operations out of China, at least not yet, but just about everyone seeks to shift new investment elsewhere, either to other emerging economies in Asia or to bring it home. The most powerful proximate causes of this new approach are the lockdowns and quarantines associated with Beijing’s zero-Covid policies. Rigid applications have made production in China both difficult and expensive, especially shipping, either within the country or for export. A recent survey conducted by Wuttke’s group indicates that some 60% of western interests in China expect a revenue decline this year. About half complain that Beijing’s policies have severely interrupted shipments of either critical inputs or finished products.
